What is a Bill of Lading?

  • What is a Bill of Lading?

    As a shipper, it’s important to know the difference between a freight bill and bill of lading (BOL) for the purposes of effective shipping logistics. They are two terms that are often confused. Not knowing the proper definitions and applications can have an impact on your bottom line. In this article, we provide in-depth information on the ins and outs of the bill of lading form. We define the BOL and why it’s important, look at the different types and cover the consequences of not using a bill of lading (or incorrectly filling one out).

    What is a bill of lading form and why is it important?

    A BOL is one of the most important documents that you will use as a shipper. It’s legally binding and provides the driver and carrier the necessary details to process a shipment and invoice it correctly.

    A bill of lading form must be accurate, complete and provided to the carrier when your freight is picked up. Here are the details needed for a complete BOL:

    • Shipper and receiver (consignee) names and addresses
    • Purchase order or account numbers used between businesses
    • Special instructions or requirements needed for on-time delivery
    • Date the freight is shipped
    • Number of units to be shipped
    • Description of freight packaging (pallets, skids, boxes, etc.)
    • Declaration if the shipment is hazardous material
    • Description of shipment including material type and common name
    • NMFC freight classification
    • Weight of the shipment (weight of each commodity should be listed separately if multiple commodities are being shipped)
    • Declared value of shipment

    BOL considerations for international shipping

    If you’re an international shipper, you are familiar with ocean, rail and air modes of shipping. And just like shipping in United States, there are some important considerations when shipping globally. The following acronyms also provide details around the bill of lading when shipping internationally:

    • OBL: Ocean bill of lading
    • AWB: Airway bill of Lading
    • ProBill:  In use for Ground Transport Service (GTS)

    Shippers should be careful and educate themselves on the nuances of BOL terminology. For example, for some countries, an OBL may mean “Ocean Bill of Landing,” but may indicate an “Original Bill of Lading” elsewhere. The key is to know what kind of BOL you are dealing with and that there is an understanding between all parties involved.

    What is on the bill of lading and why is it important?

    As noted previously, the BOL is a legal contract and can be used in litigation. That means that its accuracy and use is one of the most important things you can do to run your logistics department effectively. Additionally, this must be understood by all of those who may have accountability regarding your documentation.

    A bill of lading has three functions:

    • Evidence of contract of carriage
    • Receipt of goods
    • Document of title

    Evidence of contract of carriage

    Often, it is thought that the BOL is a contract between seller and buyer. Many also believe it is a contract between the carrier and shipper. Neither is entirely accurate, so it’s important to understand the nuances.

    The contract between a buyer and seller was established when the buyer placed the order with the seller and they both discussed and agreed on the details of the transaction.

    Additionally, the contract between shipper and the carrier was established when the shipper or their third party logistics (3PL) provider made a booking with the carrier to move the freight.

    The bill of lading is the evidence of the contract between a carrier and shipper/freight owner to carry out the transportation of the freight as per the contract between the buyer and the seller.

    Receipt of goods

    A bill of lading is issued by the carrier or 3PL to the shipper or 3PL in exchange for the receipt of the freight. The documentation is proof that the carrier has received the goods from the shipper or their 3PL in good order.

    Document of title

    This means that whoever is the holder of the BOL has the title to the goods (aka rights to claim the goods). This title varies according to the way in which the documentation has been consigned, which we discuss below.

    The difference between straight and order bill of lading

    There are two basic types of bills of lading. A straight BOL document is one in which the goods are consigned to a designated party. An order bill is one in which the goods are consigned to the order of a named party. This difference is nuanced but important in determining whether it is negotiable (capable of transferring title to the goods covered under it by its delivery or endorsement). If its terms say the freight is to be delivered to the bearer of the bill, to the order of a named party, or, as recognized in overseas trade, to a named person or assigns, a bill, as a document of title, is negotiable. In contrast, a straight bill of lading is not negotiable.

    State laws, which often include provisions from the Uniform Commercial Code, regulate the duties and liabilities imposed for covering goods shipped within state boundaries. Federal law, embodied in the Interstate Commerce Act (49 U.S.C. [1976 Ed.] § 1 et seq.) apply to bills of lading covering goods traveling in interstate commerce.

    It’s important to ensure, when signing the documentation, that the description of the goods is accurate as well as all the information in the evidence of contract of carriage, receipt of goods and document of title section above. If information is inaccurate, shipments may not make it to their destination at the desired time.

    Consequence of using inaccurate documents or not using bill of lading

    An obvious consequence of filling out a bill of lading inaccurately or not using one at all is that the product won’t get to the desired recipient. However, there are other consequences, including:

    • Exposure to claims — If the documentation indicates the goods were loaded in good condition, but they were received at the destination damaged, the consignee can make a claim against the carrier. If the information is not accurate, it will be difficult to get your full freight claim paid as you won’t have the right information to recover the cost of damage. Another example might be that the documentation listed 100 boxes but only 90 arrived. In this case, the consignee can make a claim against the carrier for the shortage.
    • Loss of the right to limit liability
    • Loss of protection and indemnity (P&I) coverage
    • Loss of the right of indemnity from the charterer
    • Criminal prosecution

    Incorrectly using a bill of lading can have severe consequences. Below we outline how you can become compliant.

    Solutions to ensure your bill of lading is correct

    • Using a Transportation Management System, such as the MyPNGLC TMS, takes all the data entry points you must have in a bill of lading and has them easily filled in to decrease the chance of error. The TMS also stores the documents, allows you to email them, and print them for ease of use. Additionally, if you have a provider, like PNGLC, that includes freight claims services for you, that documentation is easily used to make claims easier.
    • There are many online bills of lading forms you can download from the internet, but once you choose one, make sure you use the same one, so you are familiar and so are your consignees.
    • Before you sign, the easiest thing you can do is triple check all the information (as outlined above) to be accurate. It’s your signature on a legal document, so it’s vital to check.

    PNGLC can help you prevent challenges with bills of lading!

    Documentation can be confusing for shippers. But it’s essential to your business that you process documentation correctly or face inefficiency and loss of money. PNGLC can help. As a leading third-party logistics (3PL) provider, we partner with companies to ensure their shipping operations function smoothly – that includes the proper use of bills of lading. Are you ready to speak to an expert? Reach out today!

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